LONDON (Alliance News) - Carpet and floor coverings retailer Carpetright PLC Tuesday said sales from its UK business continued to grow in the first quarter of its new financial year, while its struggling businesses in the Netherlands and Belgium returned to profit.
The retailer, which issued several profit warnings in its last financial year due to continued weakness in its Dutch business and a highly competitive and deal-driven UK market, said in a statement Tuesday that, while tough trading conditions remain, it has begun to see a steady improvement in sales across the group.
Carpetright said group sales grew by 2.5% in the 13 weeks to July 26, compared with a 3.5% decline in the first quarter of last year.
The group said UK like-for-like sales increased by 6.1% in the quarter, while total UK sales were up 6.2%. Carpetright said the "small but steady improvements" in sales growth in its UK business was assisted by weaker comparatives in 2013.
"Over the period, gross profit margins [in the UK] have decreased by 260 basis points, a consequence of implementing market beating promotions," the company said in a statement.
Carpetright said it now expects a decline of between 50 and 100 basis points in gross profit margin for the full year in its UK business. In its last financial year, Carpetright said its UK gross profit margin had increased by 100 basis points to 62.5%.
During the period, the group said it opened four new UK stores and closed nine. It is currently operating from 467 stores, of which 283 stores have now been 'modernised'.
Like-for-like sales in the rest of Europe - comprising of the Netherlands, Belgium and the Republic of Ireland - were down 3.6% in local currency terms, while total sales declined by 3.9%. Carpetright said that after taking into account currency movements, total sales were down 10.1%.
"Sales across our Rest of Europe business units have shown signs of improvement on the recent trend, with a reduction in the rate of decline," Carpetright said.
The group said the performance of its business in the rest of Europe is principally a reflection of the continued difficult trading in the Netherlands. However on a positive note, it said its businesses in the Netherlands and Belgium returned to profit in the first quarter of the financial year, supported by improved sourcing and operational disciplines, it said.
Carpetright said its gross profit margin for the Rest of Europe division in the first quarter was in line with previous guidance of an increase of around 250 basis points for the full year. In its last financial year, the Rest of Europe gross profit margin fell by 50 basis point to 56.7%.
The company said it will provide its pre-close trading update for the first half of the year on October 14.
Carpetright said Wilf Walsh officially joined as chief executive last week, following the departure of former chief executive Darren Shapland late last year. Shapland was Tuesday named chairman by discount chain Poundland PLC.
Lord Harris of Peckham remains as non-executive chairman. Earlier this month, Carpetright confirmed that Deputy Chairman Sheila Noakes will retire at the company's annual general meeting in September after 13 years on the company's board.
Carpetright shares were up 0.8% at 543.00 pence before midday Tuesday.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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